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Dispatch Investigation | Credit Scars: Bad judgments

The mysterious process by which court records end up in credit reports allows for errors that are among the most damaging and difficult to resolve

View SlideshowRequest to buy this photoShari Lewis | DISPATCHBecause of a court judgment mistakenly assigned to Anne Vitale Lang’s credit report, she and her husband, John, almost were denied a mortgage for the house they had set their hearts on — and nearly lost an $8,000 federal tax credit.

Stuart K. Pratt, spokesman for the credit-reporting industry, suggests court clerks and attorneys are at fault for most of these errors.

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Anne Vitale wasn’t alarmed when she first discovered a court judgment for an unpaid payday loan on her credit report. She thought, “I can fix this.”

All that was needed was a little common sense to see that the debt was not hers. Also in her favor: She’s a lawyer who knows her way around the legal system.

But neither could help her repair her damaged credit report. Judgments, which are court-ordered repayments of debts such as medical or utility bills, can destroy a pristine credit score, the number used to decide who receives a loan and how much they will pay in interest.

When credit-report errors come from court records, they can dash dreams of homeownership, like the dream Anne Vitale had.

And judges and other court officials have no standing to correct the problems. The credit-reporting agencies won’t accept their word that a mistake was made.

Court records contain the most damning financial information — judgments, tax liens, foreclosures and bankruptcies. They are financial scarlet letters that can scar consumers for at least seven years by barring them from access to credit or costing them high fees to obtain loans.

Yet the process by which court records land on credit reports is mysterious and ripe for errors, a Dispatch investigation found.

With information about credit cards, mortgages and other types of consumer loans, the credit-reporting agencies act as repositories. They receive and store information given to them by lenders.

But in the case of court records, the credit-reporting agencies hold dual roles as both gatherers and keepers of information. Experian, Equifax and TransUnion, the three major credit-reporting agencies in the United States, hire vendors to collect the information for them and then disseminate it. The

specifics of how that process works, though, are largely unknown by consumer advocates and industry observers.

Nearly 15 percent of the 6,035 consumers who complained to the federal government said the mistakes involved their own court records. They filed complaints with the Federal Trade Commission over a 30-month period beginning in 2009 about account-related errors in their credit reports.

Additionally, nearly a quarter of the 1,094 people who said they found accounts that did not belong to them on their credit reports identified the mistaken debts as a judgment, tax lien, foreclosure or bankruptcy.

Among those who complained was an attorney who found a judgment on his credit report. He said he was not the debtor but the attorney who filed the lawsuit seeking repayment of a long-overdue debt.

Dozens of fathers and sons separated only by a “Sr.” or “Jr.” at the end of their names found tax liens on their reports that belonged to the other.

One homeowner said his house had been paid off, but it showed on his credit report as a foreclosure.

At least 80 consumers discovered bankruptcies that did not belong to them. A single person in Florida found seven.

A man in Texas said he couldn’t persuade the credit-reporting agencies to remove a tax lien that did not belong to him. As a result, he had to pay an extra $4,000 in fees when he bought his house.

A California woman said an errant tax lien appeared on her report. “They report false information with ease, needing nothing but my name and an address,” she wrote in a complaint to the Texas attorney general that was obtained by The Dispatch through a public-records request. “This monopoly of three — Experian, Equifax and TransUnion — needs to have oversight and accountability. ... They are obstructing my right to fair credit reporting.”

Part of the problem rests in the court records. To shield against identity theft, court documents accessible to the public are stripped of Social Security numbers and, at least in Ohio, birth dates. That leaves only two bits of information to match court cases to consumers: names and addresses.

“This is how you introduce errors,” said Chi Chi Wu, staff attorney at the National Consumer Law Center, which advocates for consumer rights and protections. “Name-only matches should be prohibited.”

Last month, her office issued an extensive report on errors found in criminal-background checks, which also rely on court records.

Civil and criminal records change constantly. Cases are dismissed or settled, but those changes aren’t always reflected in credit reports. And that doesn’t account for how judgments are assigned to innocent bystanders’ credit reports.

“There certainly should be a higher standard” for reporting court records, Wu said.

Pratt suspects that the vast majority of errors in court records are caused by court clerks or attorneys who file the cases. He also said the credit-reporting agencies are hamstrung by decisions to remove Social Security numbers from public court records, making matching more challenging.

“We are obligated to take the record and associate it with a (credit) file,” Pratt said.

If there is an error reported by a consumer, the credit-reporting agencies sometimes will check court records on their own, said Norm Magnuson, the association’s vice president of public affairs.

The federal law that governs credit reporting does not require the agencies to collect court records but allows them to, if they so choose.

Former industry insider John Ulzheimer said that court records are important pieces of information that lenders need, because they show that the potential borrower has an elevated risk of default.

“By and large, the vast majority of public records are correct. They are connecting the public record with the correct consumer,” said Ulzheimer, president of consumer education at SmartCredit.com. He formerly worked at both Equifax and Fair Isaac, the company that developed the most widely used credit score, called FICO.

“I don’t know how it could be 100 percent correct 100 percent of the time,” he said.

But even when the credit-reporting agencies assign debts to the correct consumers, errors exist.

In state and federal complaints, many said that debts discharged in a bankruptcy were listed as active debts. Tax liens and judgments that had been paid in full showed as unpaid.

In some cases, consumers won the court cases and weren’t obligated to pay the debt, yet the credit reports showed otherwise.

Consumers faced with inaccuracies that they can’t erase essentially have two options: live with it or file a lawsuit.

Anne Vitale chose a lesser-known path.

In August 2009, she received a certified letter at her Columbus apartment near Grandview Heights from the Franklin County Courthouse notifying her that she faced a civil lawsuit over the nonpayment of a payday loan.

Vitale, now 33, knew there had been a mistake. She has never used a payday lender. She called the attorney who filed the lawsuit, who agreed she was not the right Anne Vitale.

The correct Anne Vitale had a different Social Security number and lived on Columbus’ East Side.

The Grandview-area woman thought the matter had seen settled. But as she prepared in the winter of 2010 to buy her first house with her soon-to-be-husband, John Lang, she learned that the problem was far from over.

The judgment appeared on her credit reports.

“I was all fired up,” Vitale said. She called the attorney. “You told me this was taken care of,” she said to him.

He told her she would have to contact the credit-reporting agencies to correct the mistake.

She filed disputes with Experian and TransUnion. Her report from Equifax didn’t show the judgment. She included documents with her Social Security number and a copy of her application to the Ohio State Bar that listed, among other personal information, every address where she had lived dating to childhood. That application is a sworn, legal statement.

“Three days later, an email came back saying it will remain on my credit report,” she said.

She called the credit-reporting agencies wanting to know specifically how they determined this debt was hers. She received no answers.

She drafted a letter to the credit-reporting agencies for the attorney to sign saying that she was not the Anne Vitale with the bad debt. He ignored her repeated calls.

She called small-claims court. An employee there said, “This has nothing to do with us. There are people with laptops who check the records all day long,” Vitale recalled. They are the vendors hired by the credit-reporting agencies to peruse court records.

She filed a motion with the court to have her address removed from the lawsuit, hoping that could separate her from the bad debt. But the judge wouldn’t sign it without notification to the attorney who was ignoring Vitale.

“It just sucked up so much time,” she said.

Vitale works as a staff attorney for the Ohio Department of Public Safety. At the time she was dealing with the credit-reporting agencies, she was serving on a multi-state agency committee examining issues related to identity theft.

She happened to mention her plight to an assistant attorney general also on the committee. That attorney directed Vitale to the Ohio attorney general’s consumer-protection department.